ROC Imposes Penalty on Directors for failure to furnish MBP-1 and DIR-8 to Secretarial Auditor:

ROC Imposes Penalty on Directors for failure to furnish MBP-1 and DIR-8 to Secretarial Auditor The Registrar of Companies (ROC), Bangalore initiated adjudication proceedings against AVK Valves India Private Limited and its directors for non-compliance with disclosure requirements under the Companies Act, 2013. During inquiry, it was noted from the Secretarial Audit Report (MGT-8) that the company failed to maintain statutory records such as Form MBP-1 and DIR-8 for the financial year ending 31.03.2022. The company, in its reply, claimed that such records were available for most directors except one. However, the ROC found that no documentary evidence was produced either during inquiry or adjudication to substantiate this claim. It was also observed that the company had failed to provide these records to the Secretarial Auditor, thereby confirming non-compliance. Despite an opportunity of hearing, the explanation offered was not found satisfactory. Issue Before Court: Whether failure to maintain and furnish disclosure records (MBP-1 and DIR-8) under Section 184 attracts penalty on all directors under Section 184(4) of the Companies Act, 2013. Tribunal Held: The ROC Bangalore held that the company had violated the provisions of Section 184 by failing to maintain and produce mandatory disclosure records for directors. It rejected the company’s contention that compliance existed for certain directors, observing that no supporting evidence was produced and that records were not made available to the Secretarial Auditor. The adjudicating authority emphasized that the obligation to maintain such disclosures lies with the company and its directors collectively, and partial or unsubstantiated compliance cannot be accepted. Accordingly, all directors were held liable for the default for the financial year 2021–22. A penalty of Rs. 1,00,000 each was imposed on six directors, being the prescribed amount under Section 184(4). The directors were directed to rectify the default and pay the penalty within 90 days from receipt of the order, failing which further consequences under the Act may follow. The order also provides the right to appeal before the Regional Director within 60 days. To Read Full Order, Download PDF Given Below